Government drives Brazil pic boom

Cities flip coin to filmmakers

While many filmmakers around the world are struggling for coin, biz in Brazil is booming thanks to a generous mix of federal, state and municipal film funds, grants and tax shelters.

The range of options, combined with a rise in the amount of money available, has allowed the local industry to release an average of 80 pics a year for the past few years.

For instance, Paulinia, a town with a population of just 82,000 in Sao Paulo state, is about to dole out 9.6 million reals ($6.1 million) to 10 local pics, and has spent $22.4 million partially funding 43 pics since 2007.

The town’s investment illustrates one of the increasing variety of financing sources available to Brazilian producers — a far cry from the 1990s, when there were just two federal tax shelters.

“We now have several options, which make film funding more democratic,” says Fabiano Gullane, prexy of Gullane Filmes. “For each type of film, there is a suitable set of options.” Gullane has produced or co-produced 16 features, and plans to make five a year in the next five years.

The boom is driven by the federal government, which creates new funding systems while keeping the existing ones in place.

The country’s film tax incentive system dates back to the pioneering Audiovisual and Rouanet laws of the 1990s. To apply for those incentives, producers must present a project to the National Cinema Agency (Ancine) with script, budget and other specifics.

The Audiovisual Law allows two ways to invest in film: Through Article 1, any company based in Brazil can invest part of its tax liability into local pics; Article 3 is focused on Brazil-based foreign distributors, including the Hollywood majors, who can put part of the taxes they owe toward local productions. Introduced last year, Article 3-A extends the breaks to TV production companies.

Rouanet is similar to Audiovisual’s Article 1, except that the company funding the pic gets a rebate on production spending.

In 2003, the government created further incentives: Funds to Finance the National Film Industry, or Funcines, capital market instruments that foster and develop the industry in Brazil, in which companies can invest up to 3% of their income tax liability (individuals can invest up to 6%).

The financial institutions that manage the Funcines invest in projects and, if the project is profitable, the investors share in that wealth.

All these incentives combined to pump $105.7 million into the industry in 2010, up 30% from the previous year.

Added to this is the government’s Sector Fund, which is fed with taxes and mandatory fees paid by telcos and producers of TV content and commercials. It invests in pic production, distribution, P&A and indie TV production.

In 2009, the fund paid out $18.7 million; $51.6 million in 2010. It’s expected to release as much as $53.8 million this year.

On the municipal front, the town governments of Paulinia and Rio de Janeiro lead the pack. Paulinia houses Brazil’s largest oil refinery and has one of the nation’s highest incomes per capita.

The local government used part of the town’s plentiful tax revenues to build a large film production center in 2008. Paulinia now has a state-of-the-art theater, five studios, an arts school, a film commission and the thriving Paulinia Film Festival, which hosts Brazil’s most important competitive screening of local pics. Fest wrapped its fourth edition July 14.

Paulinia partially funded all these pics, which by contract must hold their Brazilian premieres in the town.

“Paulinia is making a great contribution to the Brazilian film industry,” says Paulinia’s secretary of culture Emerson Alves. “But the town is also profiting, as each production creates 150 to 200 jobs here.” He says the town grants up to $890,000 to each film, and the producer must spend half of the money in town and partially lense the feature there.

Paulinia also supports the productions via its film commission, and allows them to use the local studios free of charge.

Rio, which has a population of 6.3 million and houses Brazil’s largest audiovisual production center, invests in pics via city government-owned RioFilme.

In 2009-2010, RioFilme plowed $19.7 million into local pics, and granted another $4.1 million via a tax-shelter incentive.